Spain – A step forward in implementing the Corporate Sustainability Reporting Directive

Spain’s highly anticipated parliamentary bill to implement the EU’s Corporate Sustainability Reporting Directive (CSRD) has now been published and will begin its legislative journey towards enactment. 

The bill promises major changes in sustainability reporting (formerly known as non-financial reporting), affecting the entities subject to its requirements, the information to be reported and the assurance of these reports. The aim is to improve the transparency, comparability, and reliability of sustainability information. For more information on the background with respect to the CSRD, see our previous blog posts and podcast series (for example, here, here and here). 

Transposition of CSRD in Spain is expected without significant gold-plating, although several Member State options under the Directive have been taken. These include the possibility for undertakings not to disclose commercially sensitive information, the requirement to provide a local language translation of the sustainability report, and the requirement for reports to be available free of charge on companies' websites for five years. The bill also includes the possibility to appoint an independent assurance services provider or an audit firm other than the statutory auditor. 

1. Who does the bill cover? 

• Large undertakings and parent undertakings of large groups: defined as undertakings / parent undertakings which on their balance sheet dates (on an individual or consolidated basis), meet at least two of the following three criteria for each of the last two consecutive financial years:
  • A balance sheet total exceeding EUR 25 million;
  • Net turnover exceeding EUR 50 million; 
  • An average number of employees exceeding 250 during the financial year. 
• Small and medium-sized enterprises (SMEs) with securities admitted to trading on a regulated market in the EU, except for micro undertakings* (“in-scope SMEs”).  
• Credit institutions and insurance and reinsurance undertakings that meet the set criteria above (based on their specific accounting standards). 
• Spanish subsidiary (large undertaking or in-scope SME) or branch (with turnover exceeding EUR 40 million) of third-country undertakings with significant operations in the EU (net turnover exceeding EUR 150 million in the last two consecutive financial years).

The thresholds that determine whether an undertaking is micro, small, medium-size or large are the new figures set out in Commission Delegated Directive (EU) 2023/2775 of 17 October 2023. These criteria apply for financial years starting from 1 January 2024.

Sustainability reporting requirements will not apply to alternative investment funds or undertakings for collective investment in transferable securities (UCITS).

Exemptions are available for subsidiaries (including parent groups within a subsidiary subgroup) if included in the parent’s consolidated report, provided legal requirements are met. These exemptions do not apply to large undertakings with securities admitted to trading on a regulated market in the EU.

2. Contents of reports

• A "double materiality" assessment is required, involving information necessary for an understanding of (i) the undertaking’s impact on sustainability matters, and (ii) how sustainability impacts the undertaking’s development, performance and position.
• Information must be disclosed about the impacts of the activities of undertakings and along their value chain; reported sustainability information should also consider short, medium and long-term time horizons. The information requested from SMEs in the value chain should not exceed that required by in-scope SMEs.
• The sustainability report must include information about strategy, the resilience of business model, opportunities, time-bound targets, the role of management bodies, due diligence process etc. Disclosures under Article 8 of the EU’s Taxonomy Regulation (regarding environmentally sustainable activities) and information on fundamental intangible resources intrinsic to sustainability matters are also mandated.  

In exceptional cases, undertakings may omit classified or sensitive information as well as information relating to impending developments or matters in the course of negotiation where, in the duly justified opinion of the members of the board the disclosure of such information would be seriously prejudicial to the commercial position of the undertaking, provided that such omission does not prevent a fair and balanced understanding of the undertaking’s development, performance and position, and the impact of its activity.

• Reporting must adhere to the European sustainability reporting standards (ESRS) approved by the European Commission. The first set of the ESRS was published in the Official Journal of the EU on 22 December 2023 (for more details, see our blog post).   
• Undertakings’ management must inform and engage with workers’ representatives on relevant information, obtaining and verifying sustainability data.
• Streamlined requirements are set out for in-scope SMEs, allowing them to restrict sustainability reporting to certain aspects. Small and non-complex credit institutions and captive insurance and reinsurance undertakings subject to sustainability reporting may follow streamlined standards for in-scope SMEs. 
• The draft law aligns with Article 32 of Spain’s Climate Change Act, requiring financial institutions, listed companies and large undertakings to prepare annual reports on climate-related financial risk exposures. Undertakings will fulfil their Article 32 obligations by meeting the bill’s requirements.
• Firms currently required to report non-financial information must continue to do so under existing rules until the new law applies.

3. Assurance, reporting format, approval and disclosure

• Sustainability information must be accompanied by an assurance opinion from an auditor or an accredited independent assurance provider. The bill sets out the requirements for assurance providers, akin to those for statutory auditors.
• Assurers should be appointed at the general meeting of shareholders for an initial term of no less than three years, before the end of the financial year under review. For 2024, appointments may be made by the management body and confirmed at the subsequent general meeting. 
• Assurance work has a progressive scope, starting with an opinion on compliance with EU requirements, on the basis of a limited assurance engagement, transitioning to reasonable assurance engagement when the European Commission adopts standards in this respect. 
• In-scope companies must prepare their management report in the electronic format specified in Commission Delegated Regulation (EU) 2019/815. Sustainability-related information also needs to be labelled in accordance with that regulation. At the moment, this electronic format is not required yet, as confirmed by the EU Commission in its FAQs (or more information on these FAQs, see our blog post). 
• Sustainability reports must be separate agenda items for shareholder approval at general meetings; reports will be provided to the public free of charge and made available, for five years, on company websites within six months after the end of the financial year.

4. Phased introduction

The bill will have a phased implementation to aid the undertakings’ adaptation, applying to financial years starting from: 

• 1 January 2024: large undertakings and parent undertakings of large groups that are public-interest entities with an average number of employees exceeding 500 on their balance sheet dates. 
• 1 January 2025: all other large undertakings and parent undertakings of large groups.
• 1 January 2026: (i) in-scope SMEs; (ii) small and non-complex credit institutions and captive insurance and reinsurance undertakings, considered large undertakings or in-scope SMEs. For financial years starting before 1 January 2028, in-scope SMEs may exclude sustainability information from management reports, providing reasons for its absence.
• 1 January 2028: Spanish subsidiaries (large undertaking or in-scope SME) and branches (with turnover exceeding EUR 40 million) of third-country undertakings with over EUR 150 million turnover in the EU for each of the last two consecutive financial years. Special rules regarding reporting requirements apply until 6 January 2030.

5. Next steps

The bill is now being discussed in Spain's parliament and fast-tracked with the aim of getting it enacted into law by 31 December 2024.

In view of the possibility that the transposition of the CSRD in Spain is not completed by 31 December 2024, the Spanish Securities Market Commission (CNMV) and the Spanish Accounting and Audit Institute (ICAC) have issued a joint statement recommending entities to prepare sustainability reporting for the financial year 2024 in line with the CSRD and the ESRS. This is provided that they also include in the report some additional information required by current Spanish Law 11/2028 (which transposed Non-Financial Reporting Directive (NFRD)) that is not expressly contemplated by the ESRS (regarding tax information, certain employment-related disclosures, and also transitory provisions).  

In this respect, the CNMV and the ICAC will consider ESRS-compliant sustainability reporting acceptable, which will also be considered compliant with Spanish Law 11/2018, subject to including the above information. 

In relation to the assurance of this reporting by an independent expert, the statement recommends that assurers take into account the latest national and international developments, namely the technical assurance standard from the ICAC (pending approval), the guidelines published by the CEAOB and the ISSA 5000.

View our Transposition Tracker to find out the current status in other EU Member States. For more information on the CSRD, see our CSRD Demystified materials.